The Academic Staff Union of Universities (ASUU), a Nigerian union of university academic staff, is still on strike. They want more funding in the nation’s universities. There is nothing wrong with that. But the very fact remains that government has expanded the university system beyond its possible capacity to fund. What ASUU wants, even if met by government, may not last long, before new strikes evolve.
Nigeria has to find ways for private sector to become partners in our university system financing. Private financing in the public schools will help our schools. Today, that is not happening because there is no practical benefit for companies to do so. The schools are not centers of excellence and companies cannot see them as partners in the creation and dissemination of knowledge.
The very few donations coming from individuals are also small. Most donate to get recognition and titles like Honorary Doctoral Degrees. They might have done better if there is a way government can create financial incentives for companies and individuals to open their bank accounts and donate to our public schools. When you provide incentives, which help citizens and companies to do well and also save money, great things happen..
The U.S. Model
In U.S., alumni make great donations to their alma maters. Michael Bloomberg might have given nearly $1 billion to my alma mater, the Johns Hopkins University. Across the U.S., many U.S. business schools are named after business leaders. Those people opened their wallets and made donations. Sure, they love the institutions to have made donations. But many would not have done so if the tax system has not stimulated the giving through financial incentives. Making those donations help balance many elements in their personal and company finances. Nigeria does not have that at the moment.
Right now Apple is working with 30 community colleges in U.S. as it pushes the adoption of the SWIFT language. Community colleges are like Nigeria’s OND education in our polytechnics. What Apple does is to support those schools to deepen their capabilities and help the students learn new skills which will help them in their careers. It is a great win-win, and any school chosen will be better off..
Community college students may have a lot more Apple-related course work during the new school year.
The technology giant said Friday that its education curriculum related to its Swift programming language would be offered at 30 community colleges throughout the U.S.Apple CEO Tim Cook announced the curriculum rollout at a press conference in Austin, Tex. with the city’s mayor, Steve Adler. Several community colleges in Austin will begin teaching the Apple-sanctioned curriculum, which Apple said would reach 74,000 students this fall
There are good implications when companies like Ford, GM, Chrysler and other top American companies put money in schools. They not just fund the schools; they provide the avenues to introduce new areas the schools need. Here are the benefits for the firms and the schools:
- Companies can outsource the training, allowing them to focus on their businesses. The schools do the work for them. In Apple’s case noted above, it wants to popularize the Swift language. There is no better way to do so than working with schools
- Donation money given to schools is tax deductible because the schools are tax-exempt under the U.S. Internal Revenue Service tax code. This is the key reason. If Apple or GM were to do the training in-house, the tax benefits will not materialize. They will still train the young people, but they cannot deduct that money. But by giving the money to colleges, they get the trained people and still get the deductions. This makes it easier when you need scale, beyond what you can have inside as staff for talent pipeline.
- Apple through this training will be getting pipeline of talent. The same applies to most U.S. firms. They want welders; they fund a local school to train welders to ensure they have enough for their businesses.
- It also provides goodwill as the local economy will see a boost through the injection of capital in the schools. The implications are huge: the school fees will drop for the students as companies have subsidized some parts, nearby businesses grow, and everyone is happy.
What Nigeria Can Do
The Nigerian tax system is not designed to support philanthropy. That is why we do not have a vibrant one. It does not mean that a nation must be rich first before its tax system can be engineered to stimulate philanthropy. ASUU can lead on that, through Tax Reform, and make it possible for individuals and companies to put money in the schools and get tax benefits. Sure, ASUU members may be busy, but that should not stop them from helping the government to revamp our tax codes to drive innovation.
The 501(c)3 tax structure in U.S. has unlocked a lot of private sector capital into the “doing good” business. Nigeria must find its own model. I explain why this will be appealing in the educational system.
If Company A wants to start a factory in Owerri Nigeria and needs to train 1000 people in the areas it does business. It can ask Federal University of Technology Owerri to do that training, providing the manuals and documents required. It will fund it say with $3 million for three years. FUTO may integrate the program in its curricula (NUC may need to approve). FUTO has received funding, expanded its program and at the same time graduating students that will likely have jobs when they finish. Brilliant!
For Company A, it has moved the non-core training out to focus on its business, knowing that whenever it wants talent, FUTO is preparing them. Then on that $3 million, Nigerian government allows it to deduct it, non taxable. Simply, the revenue where that money has come will not be taxed because it has been used to do good to the society. Just like that, the company has saved money and at the same time assisted FUTO to deepen its programs. That is an incentive which does not exist right now, and Nigeria needs to update our tax system to make it possible.
Today, what is possible is to deduct that $3 million as an expense, meaning that it is recognized in the tax book as pure business. That is not enough as the resulting balance will be taxed accordingly. In U.S. that $3 million is treated differently, offsetting not just its expense but other areas the company might have experienced losses. So magically, you use donation to make-up. That is why giving is financially good, under some circumstances, for both the recipients and the givers.
Here is how they do it in U.S, according to Fidelity, the best in the world.
- Capital gains taxes are eliminated when you contribute long-term appreciated assets directly to a charity…
- In those select situations, you may choose to supplement a charitable gift of securities with a charitable contribution of cash so that the maximum charitable contribution deduction limit of 50% of your AGI may be claimed. This strategic combination of giving is an opportunity to reduce your taxable income.
- One simple offsetting measure is aligning your charitable giving with the rebalancing process. Instead of writing a check to a favorite charity this year, consider donating your most highly appreciated security, which you have held for over a year. Capital gains taxes typically will not apply to you or the charity receiving the donation, and because you didn’t write a check, you may have cash available to purchase more stocks as part of your rebalancing exercise
Fidelity has nine strategies, I have noted only three above. In short, if you are rich and not giving in U.S., you may be losing money!
Now, over to ASUU and those that love education! If you want local Microsoft, Google, Oracle and more to give and support our schools, you may need to update the tax laws in Nigeria. They will respond if you make it easy to do good to the society, and save money via donations; I guarantee that.
---Visit our Store for my books, cases, frameworks and more. Now, enjoy our consolidated subscription for all contents (past, present and future).
-- We offer Advisory Services (tech, strategy & Africa).